Since the establishment of rural collective ownership in the late 1950s, rural land appreciation income sharing has gradually shifted to the negotiation, communication and transaction during farmers, community (collectives), local government and central government, with multiple subjects participating in benefit sharing. In this process, what benefits did collectives gain? What is the basis of property rights for collectives to acquire appreciation income sharing? The existing research on the reform of the rural property rights system mostly stays at the static level, which lacks a dynamic analysis of the system’s formation and transformation process within the group. In addition, the existing studies have not combed and summarized the land appreciation income sharing rules changes in the process of rural land system reform from the macro level, lacking focus on the special subject of collectives. However, in sharp contrast to the weak academic research is the huge amount of land appreciation income generated in the process of industrialization and urbanization caused more and more social conflicts. In recent years, emerging economic theories such as behavioral economics believe that individual cognition is an important internal source of the system, and advocate understanding the process of system change from the perspective of individual cognition. Therefore, this study firstly attempts to combine heterogeneous individual cognition with rule change, constructing a multi-level dynamic evolution analysis framework from individual cognition to the external rules with evolutionary thinking. Secondly, this study analyzes the institutional change process of land appreciation income sharing system, which combines with the land system reform practice in China. The results show that collectives and peasants play important roles in the evolution process, because under the external environment, their individual cognition forms the internal rules based on their own interests. The government’s selective acceptance and "promising" design have facilitated the harmonious interaction between external rules and internal rules and formed institutional changes. In general, the appreciation income share is gradually inclined to the peasants. And in this process, the identity of collective becomes more diversified, not only the owner of land, but also providing service and gaming with government. At the same time, the source of appreciation income becoming more abundant. In terms of future trends, institutional change requires the change in the external environment as an opportunity to stimulate the expression of individual cognition, and institutional changes will evolve toward improving rights and increasing income of collective and peasant. However, not all internal rules will be converted into external rules. Only under the premise of not threatening the urban land market and guaranteeing the interests of the government, the government will coordinate external rules, gradually decentralize and make profits, and finally realize institutional changes.
